Analyst: The Bank of Japan has not clearly outlined its path for raising interest rates. In the short term, the yen may be slightly weak but with limited volatility.

Analysts said that the weakening of the Japanese yen against the US dollar was due to the lack of clear guidance from the Bank of Japan on the timing of future monetary tightening. Prior to this, the Bank of Japan raised its benchmark interest rate to the highest level since 1995, in line with expectations. Following the latest interest rate decision, Japanese government bond yields rose, with the 10-year bond yield in Japan surpassing 2% for the first time since 2006. After Bank of Japan Governor Kioji Ueda held a press conference, the yen weakened, falling by about 0.8%, with the US dollar trading near 156. Here are some analysts' views: Marlborough Investment Management Portfolio Manager James Athey As with previous rate hikes, the Bank of Japan is always cautious and prudent in its decisions to tighten monetary policy. The impression they give is that they want to appear to tighten policy on the surface, but in reality will not have the same impact on markets as before in order to avoid any negative consequences and criticism in the future. Few investors are willing to take on the risk of going long on the yen during the holiday season unless there are compelling reasons to do so, and Kioji Ueda has not provided such reasons. Many have long believed that intervention measures are needed once the USD/JPY surpasses 160, so I would be very surprised if it crossed that level. Astris Advisory Japan Head of Strategy Neil Newman It's too little, too late. With the Fed possibly needing to cut rates twice more, if the Bank of Japan wants to curb the yen's weakness, they need to raise their policy rate to 1.25-1.5% next year. Considering that the market crash of 2024 was blamed on a 0.25% rate hike, today's market reaction is as good as it gets. The Topix bank index has risen 40% year-to-date, up 10% from a month ago. It may be time to thank this trade and start looking for new investment opportunities. Brown Brothers Harriman Global Head of Market Strategy Elias Haddad The yen weakened after the Bank of Japan's policy adjustment largely because they did not clearly adjust their expectations for the neutral rate range, indicating that the Bank of Japan chose to continue maintaining loose monetary policy. However, we believe this argument does not hold water and the yen exchange rate will not fall below support. In our view, the Bank of Japan's rate hike stance is hawkish this time. Firstly, the Bank of Japan warned that the risk of disrupting companies' active wage-setting behavior is low, which means potential wage and inflation pressures may persist. Secondly, Bank of Japan Governor Kioji Ueda pointed out that there is still a distance between the policy rate and the lower bound of the neutral rate range. The Bank of Japan currently estimates a wide neutral rate range, between 1% and 2.5%. Sony Financial Group Senior Analyst Junichiro Morimoto The Yen seems to be selling off despite the hawkish tone in the Bank of Japan's monetary policy statement and Governor Kioji Ueda's remarks at the press conference. With Christmas approaching next week, expect price movements to be subdued. There is no momentum for USD/JPY to break 160, and we expect the year-end closing price to be around 155. ANZ Group Holdings Strategist Felix Ryan Although we expect the Bank of Japan to hike rates in 2026 (a 25 basis points hike in April), we believe the yen will lag behind other G10 currencies in the next year as the interest rate differential is still unfavorable for the yen. We expect the USD/JPY exchange rate to reach 153 by the end of 2026. T&D Asset Management Chief Strategist Hiroshi Namioka The yen weakening and the stock market rebound may reflect the market's overly cautious reaction before the announcement. The Bank of Japan stated that even after the policy adjustment, real interest rates remain low, indicating that the final rate is higher than 0.75% and the tightening cycle will continue. Eastspring Investments Fixed Income Portfolio Manager Rong Ren Goh Given that the Bank of Japan is trying to allow the economy to run "hot" for a period before using monetary policy tightening measures to curb overheating, the market is concerned about the possibility that the Bank may need to increase rather than decrease the rate hike size, increasing the risk of rising rates. Therefore, if the Bank of Japan does not clearly indicate the policy direction or make a commitment, the market may continue to price in the risk of the Bank's action lagging behind. SMBC Trust Bank Investment Research Director Masahiro Yamaguchi As the market expects negative real interest rates to persist in the short term, the yen is falling, and the yen's weakness is driving the stock market to continue its upward trend. Singapore SEB Bank Head of Asian Strategy Eugenia Fabon Victorino While the statement does not rule out the possibility of further rate hikes, it does not indicate a change in the pace of tightening. Therefore, we expect the next rate hike to be no earlier than June or July next year. The market has already digested this decision. Given that the Bank of Japan has refused to reveal the timing of the next rate hike, it is safest to go long on USD/JPY. The only hope for USD/JPY to fall to 152 from the current level is a USD pullback, which we expect to happen in the first quarter.